Will London IPO market stage a recovery in 2025?

Potential IPOs by fintechs, Shein or corporate spin-offs such as De Beers offer some hope that 2025 will mark the end of a barren three years for new corporate listings.

The shrinking of the London market accelerated during 2024 after a period in which many more companies were bought or chose to move overseas than joined the market.

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The year started with optimism over a listing for Walgreens Boots Alliance Inc (NASDAQ:WBA) and the sale of the Treasury’s remaining NatWest Group (LSE:NWG) holding as part of a drive to “create a new generation of retail investors”.

The general election put paid to the NatWest offer, while a desire to avoid potentially volatile market windows such as the UK Budget and US election led to a particularly quiet second half.

The Boots listing never happened, but Raspberry Pi Holdings (LSE:RPI) was one IPO that did take place. The £179 million raised was much smaller than the year’s biggest European deals, such as the IPOs of private equity firm CVC Capital Partners (EURONEXT:CVC) and Barcelona-based luxury brands owner Puig Brands SA Ordinary Shares - Class B (XMAD:PUIG).

The debut of Canal+ SA (LSE:CAN) shares offered cheer in December after the four-way split of Vivendi resulted in the production company behind the Paddington movies being listed in London. It is domiciled in France so isn’t eligible for inclusion in the FTSE indices.

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Smaller debuts included Applied Nutrition (LSE:APN) in October and the cash shell Rosebank Industries Ordinary Shares (LSE:ROSE), which has the same team behind the IPO-to-FTSE 100 success of Melrose Industries (LSE:MRO).

The total for 2024 still left London in 20th place, below Luxembourg, Oman and Malaysia, in Bloomberg’s rankings for money raised. The $1 billion total compared with $20 billion in 2021 when Deliveroo (LSE:ROO), Trustpilot Group (LSE:TRST) and Moonpig Group Ordinary Shares (LSE:MOON) were among the newcomers.

Panmure Liberum estimates that IPO activity is on track to end the year some 91% below the 10-year average, a performance it said many would find hard to believe after the previous two quiet years.

Analyst Joachim Klement said the decline contrasted to Europe and the US, where IPO activity has not only normalised but is shaping up to be an above average year.

He added: “There simply is no sugar-coating the decline of the UK market as a place for private companies to go public.

“In our view, significant reforms to boost the UK stock market are needed. It is time for UK investment banks, the London Stock Exchange and regulators to realise the seriousness of the situation and take action.

“Given the strong recovery outside the UK, there are no more excuses.”

In the summer, the biggest shake-up of the listings rules in 30 years included the streamlining of eligibility for those companies seeking to list their shares in the UK.

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The relaxation of rules for non-UK incorporated firms recently opened the door for Greece’s Metlen Energy & Metals to announce it will seek a primary listing in London alongside a secondary listing on the Athens Stock Exchange.

Recent speculation has also focused on China’s fast fashion chain Shein, which is reportedly set for a record-breaking $66 billion (£52.3 billion) flotation. According to Reuters, it has asked regulators to waive listing rules that require at least 10% of its shares to be sold to the public.

Peel Hunt feels more constructive about the outlook for IPOs in 2025, given the UK’s relative political stability and macroeconomic outlook. Persistent fund outflows have reversed and there is capital out there for deals where they are compelling.

It reported “a tangible pipeline of companies” that are seeing investors in early look processes and are monitoring windows for next year.

The bank said: “We expect the UK IPO market to have a larger deal size focus in 2025, with a number of these companies part of that group currently seeing investors in pre-marketing.”

Outside IPOs, Peel Hunt said accelerated bookbuilds and other capital raisings were of a level three times that of the next highest European exchange and clearly demonstrated the depth of demand available in the UK for the right deals.

The US is typically the lead indicator for IPOs in the UK and Europe, meaning there’s cause for optimism based on the strong pipeline reported by Wall Street.

Recent media speculation reveals a strong presence of financials and fintech companies in the list of potential UK newcomers, such as online bank Zopa, the buy-now-pay-later fintech Zilch and cross-border trading firm Ebury.

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London-based OakNorth Bank, whose chair is former Financial Services Authority head Adair Turner, is said to be considering whether to float in the UK or United States. It was valued at $2.8 billion in 2019 when SoftBank led a $440 million funding round.

Starling Group, another online challenger bank, has been linked in recent years to a London IPO and said as recently as June that it is still “very committed” to such a move.​​​​​​​

Cloud banking technology company Thought Machine has indicated that the UK is its preferred IPO destination.

Chief executive Paul Taylor told City AM In September: “London is our home, and all other things being equal, we’d be very keen to list in London. But it’s not just a decision that only I can take – our existing investors would have a strong voice in that. There’s a lot of momentum behind New York.”

Revolut is planning to go public but chief executive Nik Storonsky has said a London IPO is “not rational” due to the liquidity offered by the US market.

Following the December debut of Canal+, the corporate spin-off theme could continue in 2025 if Unilever (LSE:ULVR) chooses to separate its ice cream division through a London listing.

And Anglo American (LSE:AAL) announced this year that it will consider options for the diamonds business De Beers, potentially through a demerger or sale as part of plans to streamline its portfolio.